The milk price war is heating up, with Fonterra Australia and Bega Cheese both announcing opening prices of $6.60/kg MS for the 2019-20 season.
The opening prices came within days of each other, as processors compete with falling milk supply and an increasingly competitive market.
In a letter to suppliers, Bega Cheese chief executive officer Paul van Heerwaarden said their opening price was a 12.8 per cent increase on last season’s price.
In addition, northern Victorian farmers will be eligible for an irrigation supplement of a further $0.20/kg MS on top of the opening price, to be paid monthly.
Those who take up an additional Bega Supply Premium will receive $0.25/kg MS (two-year premium) or $0.50/kg MS (three-year premium) for new suppliers.
‘‘Overall northern Victorian farms can earn up to $6.97/kg MS (including $0.17 per three year BSP) in respect of the 2019-20 financial year,’’ Mr van Heerwaarden wrote.
Bega Cheese has also announced it will shift to a 9/3 payment system.
‘‘This is a simple payment system that increases early season cash flow and encourages farmers to produce milk at a time that suits their farm business,’’ Mr van Heerwaarden told suppliers.
‘‘There are only two prices — spring (September, October and November) and out of spring — with a differential between these prices of $0.50/kg MS.’’
Gunbower supplier Clare Modra said she was hoping for a little bit more money to start the season.
‘‘We have been with Bega for three years and they are always competitive, so hopefully there will be some step-ups through the season,’’ Mrs Modra said.
She said she liked the idea of the irrigation supplement payment and she was of the understanding that it could be taken early, as an upfront payment.
Tragowel supplier Mick Shepard was unsure what all the ins and outs of the pricing meant for him personally and was waiting for a visit from the field officer before he would comment.
‘‘I don’t understand it all properly yet,’’ Mr Shepard said.
Fonterra Australia managing director René Dedoncker said the decision to announce the company’s $6.60/kg MS opening price in May would help dairy farmers make decisions on-farm.
‘‘As our industry and business evolve to deal with a smaller milk pool, we have a stronger focus on servicing local demand which brings greater opportunity for certainty on pricing,’’ Mr Dedoncker said.
‘‘The broader global supply and demand picture is positive, with demand expected to remain strong across key trading partners and a favourable exchange rate.
‘‘Importantly, it’s a competitive milk price for our Australian farmers that enables us to maintain a sustainable model in Australia and deliver a return on investment for our business.’’